A year of instant payments: achievements and ambitious plans

Instant payments provide a good notion of what modern financial services should be like. The 21st century consumer expects any service to be available online, here and now. Paying invoices, making purchases or transferring funds to a friend's or relative's account can take place at any hour of the day or night and from any location with internet access. It only takes a couple of clicks and seconds for the money to reach the recipient. Instant payments are quick, convenient, secure and user-friendly.

28 August of 2018 marks one year since Latvijas Banka became the first euro area central bank to introduce the instant payments (instant interbank transfers executed within a matter of seconds 24/7/365) infrastructure for commercial banks and other payment service providers having the task of ensuring this service to their customers.

Since November 2017, the customers of banks "Citadele" and "SEB banka" have already been benefitting from the advantages of instant payments by making both mutual transfers and transfers to more than 1000 euro area banks. At this point of time, the majority of the customer payments between the two commercial banks are already made via the so-called instant payments channel, i.e. they are executed instantly 24/7/365. Over the past nine months, more than 1.2 million instant payments were processed in Latvijas Banka's system, with positive feedback received from both technology experts and bank customers. With regard to the introduction of instant payments, Latvia is the leading euro area country and is also well ahead of its neighbouring countries. In the coming months, the number of the commercial banks providing the instant payment settlement service to their customers is expected to rise and the vast majority of the mutual payments between individuals and companies in Latvia will be made based on this infrastructure – they will be executed instantly and at any time. This will significantly save the consumers' time and provide various opportunities for better management of their funds.

The saying "time is money" is as relevant now as ever before. Smartphones, more time spent online, the possibility to access the internet at any place having mobile connection – these and other technologies are changing our everyday life. We are already used to being able to make any transaction at the preferred time and place. For instance, online shopping becomes increasingly more popular as compared to the traditional in-store shopping. Similarly, instead of paying in cash, we increasingly choose other payment methods, i.e. payments by means of credit cards and transfers.

The shift in behaviour is particularly pronounced among young people who cannot imagine a life with slow internet and expect identical speed for making different types of purchases and transfers online. Instant payments are a significant part of these and other future services, since they open up opportunities to provide various services very quickly. A smartphone is currently the most convenient device for making instant payments, but they can also be executed via internet banking. Those who do not use smartphones but for whom it is important to receive money on their account at any time, including weekends and holidays, can also benefit from the advantages of instant payments. The infrastructure for instant payments is universal, and it will be accessible on any other devices in future, in the age of the Internet of Things in particular.

To meet the needs of the general public, commercial banks, creative FinTech companies and merchants need to introduce more and more creative settlement solutions. The future of instant payments lies in their closer integration with the opportunities provided by smartphones and other mobile devices to enable people to use this settlement method when making purchases at stores or paying for various everyday services, e.g. catering and transportation services, etc.

Instant payments have the obvious potential of not only significantly accelerating the speed of processes, but also facilitating lower fees, simpler payment processes, alternatives for retail traders and service providers and, eventually, also strengthening consumer confidence. For instance, when resolving disputes between buyers and sellers, it will be possible to immediately refund the money spent for the purchase, thus creating a more positive buying experience.

It will be possible to settle an invoice or transfer funds to a friend's account from a smartphone by touching its screen just a few times and making the payment in a couple of seconds. Request the instant payment settlement service from your bank now!